Following his acquisition of the social media giant in 2022, Elon Musk has been embroiled in numerous legal challenges for terminating over 6,000 employees, including former CEO Parag Agrawal. A notable victory came Musk’s way on Tuesday when a federal judge determined that X Corp. is not obligated to provide additional severance to the dismissed staff members.
Initiated by the former director of people experience and another past manager, the lawsuit accused X Corp. of not fulfilling its severance promises to the dismissed Twitter workforce. According to the legal complaint, the company provided a maximum of three months’ severance pay, a fact affirmed by Musk in a social media post. This was in contrast to a severance plan established in 2019, offering up to six months of severance for senior roles.
The lawsuit’s claimants argued that Musk’s actions deprived the former staffers of over $500 million in benefits, under the protection of the federal Employee Retirement Income Security Act (ERISA).
The class action suit was dismissed by U.S. District Judge Trina Thompson in San Francisco on Tuesday.
Judge Thompson noted in her filing that the ERISA protections were inapplicable since Musk’s team had informed employees shortly after the takeover in October 2022 that only cash compensations would be issued, thus not falling under the original severance agreement post-November mass layoffs.
“The ruling is a disappointment, and we are exploring potential avenues moving forward,” commented a representative from Sanford Heisler Sharp, the law firm representing the plaintiffs, in a communication to TechCrunch.
Post-layoffs in November 2022, X Corp. has continued operating the platform with significantly reduced manpower. In 2023, Musk divulged to the BBC that the employee count had been reduced to 1,500 from roughly 8,000 prior to his takeover, in a bid to slash costs significantly. Yet, the firm has faced financial hurdles as revealed by Bloomberg documents, showing a loss of $456 million in the first quarter of 2023.
Musk’s legal challenges over the mass terminations are far from over. Agrawal and three other former Twitter executives are demanding $128 million in severance from X Corp. following their layoffs. Another legal action by former Twitter senior staff seeks over $1 million in severance, a commitment Musk disputes.
Updates were made to this article on July 10 at 12:48 PM PDT, incorporating comments from Sanford Heisler Sharp.
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